The current finance transformation being experienced by the banking and financial service sectors is the culmination of thousands of tech innovations and shifting business cultures. Even the most conservative banks now understand that adopting digital finance platforms and digital-centric policies is no longer a question of if and when but how.
The main reason to introduce a new digital banking platform is for better process automation. Process automation improves research and development, speeds up time-to-market, reduces overhead expenses, and allows financial institutions (FIs) to focus on people-oriented issues such as client service. Therefore, investing in digital transformation is key to becoming relevant in increasingly hyper-competitive financial markets.
The economic disruptions of the early 2020s found thousands of FIs worldwide scrambling to integrate adaptive digital platforms into their processes belatedly, simply as a means to survive. Unfortunately, only some of these efforts to integrate new tech have been satisfactory, resulting in wasted opportunities and market losses to more agile FIs and upstart fintech competitors.
While transformation speed does count for a lot, being deliberate with how platform transitions are handled counts for much more. Here’s how your bank should aim to transition its systems and processes:
Step 1: Audit the Bank’s Existing Processes
Identifying current processes allows FIs to prepare before the introduction of the new system adequately. Another reason to do an audit is that it allows the institution to re-evaluate current government regulations and incoming changes to compliance requirements.
In some cases, the current system may still be viable, and existing processes could still be automated and modified to a competitive level. All a bank may have to do is re-optimize the existing system. This may allow the institution to delay its upgrade in the short term.
However, in most cases, banks should seriously consider an update, especially if their legacy system is approaching a decade old. Recent improvements in technology have allowed massive leaps in processing power as well as in machine learning capabilities.
Updating to the right system will often mean any desired process automation and compliance will be done faster and more effectively than would otherwise be possible on legacy systems.
Step 2: Define Essential Goals and Capabilities
Many banks have made the mistake of updating their platforms simply for the sake of updating. This kind of motivation can easily lead to many lost opportunities and cause banks to have ineffective implementations that fail to outperform legacy systems meaningfully.
After the initial process audit, decision-makers have to consider the direction they want to take the institution. Should they pivot to new markets? Diversify? Double down on serving existing clients? Stakeholders should ask themselves these and many other questions before committing to a fundamental change in their banking platform.
This phase is especially sensitive, as different stakeholders in the institution will have differing opinions on the direction to take. The final agreed direction should decide the types of technologies the bank chooses to invest in.
Step 3: Choose Technology Platforms That Help Meet Predefined Goals
Thankfully, banks and other FIs are now spoiled for choice when it comes to options for new tech platforms. Most banks will likely want a solution that offers at least the following:
● Agile Methodology. Many banks are moving away from waterfall methodologies for project management. Agile methodologies are starting to be preferred due to their additional flexibility, which is welcome in today’s highly volatile financial markets.
● Cloud Capabilities. Most banks have already moved at least part of their computing capacity off-premise in favor of various cloud implementations. Cloud-based and hybrid systems offer much better reliability, implementation flexibility, and robustness than traditional on-premise systems. System maintenance also tends to be more cost-effective on cloud-based systems, which helps bring down overhead costs.
● Fast Implementation. A decade ago, it was not unusual for core system transitions to take up to two years. Today, more technology partners can provide faster replacement processes that only take a few quarters. This faster implementation allows FIs to quickly take advantage of the benefits offered by current-generation financial solutions.
● Out-of-the-Box Compliance. Many local jurisdictions have specific regulatory requirements that need to be addressed. Having a platform that does these local compliance steps out of the box will save the FI from unnecessary expenses related to modifications and regulatory fines.
Of course, each bank will have different goals and technology requirements, depending on the direction they want to take. These will all have to guide the bank so that it selects the best vendors and technology partners to help implement the transformation.
Step 4: Invest in User Training
Unfortunately, many banks need to consider the end-user when it comes to their systems upgrades. Aside from tech investments, FIs also need to consider how their employees and clients will interact with the new system. To maximize the value derived from any new platform, banks have to train users in their use.
From the employee side, this is straightforward. Banks can choose vendors that offer training and adequate after-sales support. Educating customers may have to involve an omnichannel marketing campaign as well as improvements in customer service processes.
Step 5: Implement the Technology
Depending on the bank’s strategy and chosen platforms, the implementation phase can take anywhere from a few months to a few years. During this time, the focus should be on implementing the new system and transitioning away from older platforms.
This complex process will rarely play out the same way for any two FIs. However, suppose all the previous steps have been done properly. In that case, implementation issues should be relatively easy to overcome, especially with the right technology partners to advise the FI’s IT team.
Step 6: Continually Audit Your Processes
After implementation, there will always be a few bugs and user experience issues to take care of. Continual system audits throughout the entire lifespan of the platform should help ensure continuous improvement, minimizing problems that negatively affect user and client experiences.
Transform Your Banking Capabilities Effectively and Sustainably
Banks have to stop considering finance transformation as just another tech investment. It has to be given plenty of thought as it requires the buy-in of all decision-makers and key employees for it to succeed.
With deliberate implementation, transformation can help banks achieve better and wider-reaching outcomes in terms of savings, operational readiness, risk mitigation, and revenue. This becomes especially true if the bank chooses the right tech partners and solutions to aid the finance transformation process.
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